M A R K E T B E AT
Luxembourg Retail Market Retail Q3 2021
YoY Chg
12-Mo. Forecast
23,080
Take-Up YTD (sq m)
Luxembourg economic growth returning as expected to pre crisis level. After a limited decline in 2020, the real GDP growth is expected to bounce back to 6.92% on an annual basis in 2021, one of the most important recoveries across Europe. Though decelerating in the medium term, GDP growth should remain above 5% in 2022 and reach 2.50% in 2025.
54
Deals YTD
140 EUR/sq m/m.
-
Prime rent High Street
3.75%
Prime Yield (3/6/9 Lease)
Sentiment indicators also suggest a positive outlook for Luxembourg’s economy. Business sentiment has improved, also outside the financial services sector. Consumer sentiment, meanwhile, showed a strong recovery since spring 2021, after the dramatic fall recorded between March and the end 2020. Consumers are more confident about the economic recovery of the country. However, they are more concerned about their financial situation and their willingness to spend also decreased these last months. Inflation is projected to rise to 2.25% in 2021 due to oil price increases, the introduction of a carbon tax, the rebound in consumption, and base effects linked to the introduction of free public transportation in 2020. However, this pressure on prices is expected to be temporary and to ease as from 2022. Consequently, inflation is expected to decline to 1.56% in 2022 and 1.35% in 2023.
ECONOMIC INDICATORS Q2 2021
5.88%
YoY Chg
12-Mo. Forecast
Unemployment Rate 2021
-15 -20
20 25
20 24
20 23
20 22
Un empl oymen t rate
-30 01 -2 07 01 3 -2 01 01 3 -2 07 01 4 -2 01 01 4 -2 07 01 5 -2 01 01 5 -2 07 01 6 -2 01 01 6 -2 07 01 7 -2 01 01 7 -2 07 01 8 -2 01 01 8 -2 07 01 9 -2 01 01 9 -2 07 02 0 -2 01 02 0 -2 07 02 1 -2 02 1
GDP Gro wth
20 21
-25 20 20
Please note the economic data can vary significantly from one source to the other. Therefore, the figures provided should merely be used as an indication or trend.
-10
20 19
Source: Moody’s Analytics, Statec.lu, Eurostat
0 -5
20 18
Inflation for 2021
5
20 17
2.25%
Consumers’ confidence index
8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% 20 16
GDP Growth for 2021
GDP Growth (LHS) and Unemployment rate (RHS)
20 15
6.92%
M A R K E T B E AT
Luxembourg Retail Market Retail Q3 2021 Lower take-up in Q3, though robust year recorded so far.
# deals by quarter (LHS) and total take-up (000s sq m, RHS)
14 deals were observed in Q3 2021 for a total take-up of 5,100 sq m. However, the COVID-19 outbreak seems to have only limited impact on the retail letting market with a year 2021 YTD almost in line with previous years (see right-hand axis). Moreover, in number of deals, with 54 transactions recorded in 2021 so far, the Luxembourg retail market is perfectly in line with previous years as well.
12 0
14 0
10 0
12 0 10 0
80
80
60
Out of Town retail represents more than 50% of the take-up.
60
40
40
20
Overall, the High Street sector recorded an occupancy of around 6,600 sq m in 2021 so far, already in line with the activity observed for the whole year for the 2018-2020 period. The retail landscape is currently in a profound mutation with a growing shift towards online retail, changing consumers’ patterns and demographic shifts namely. However, the Luxembourg market is resilient and also succeeded in attracting new brands on its territory. The City Centre continues its redevelopment with the works currently ongoing close to the train station which currently records less activity, though a rebound is expected once the construction works will be over. A low level of activity was observed in the shopping centre in Q3. The total take-up year-to-date amounts to 3,810 sq m, namely thanks to an important activity observed in the Belval Plaza Shopping Centre in the start to the year.
20
0
0 20 15
20 16 Q1
20 17
20 18
Q2
20 19
20 20
Q3
20 21
Q4
Take-u p
Take-up by market segment (000s sq m) 14 0 12 0 10 0
As observed in other European countries, activity in the Out of Town format continues to perform at full speed since the COVID-19 outbreak. In Luxembourg, the Out of Town is still under expansion and not yet a mature market, though activity is on the rise. In Q3, the letting of 1,850 sq m by Trafic in Mersch boosted the activity. Since the start of the year, more than 12,000 sq m of take-up is recorded in this segment. This represents more than 50% of the total activity. This sector should continue their expansion in the coming months, as the pipeline indicates.
80 60 40 20 0 20 15
Increase of prime rental levels in Q3 2021 and further upward movement expected in the coming months. Prime rental levels in the High Steet and Shopping Centre segments have been impacted in 2020 by the COVID-19 crisis. However, the situation is recovering in Q3 2021 in almost all market segments.
20 16 Mai n Stre et
20 17
20 18
20 19
Sho ppi ng Ce ntre
20 20
21 YTD
Out o f Town
Prime rents evolution by segment (EUR / sq m / month) 25 0 20 0 15 0
In the Shopping Centre segment, prime rents are stable since the start of the year to 90 EUR/sq m/month and are not expected to increase before 2023. They should however reach the 100 EUR/sq m/month cap back in 2025.
10 0
Conversely to the High Street and Shopping Centre, the Out of Town has been less impacted by the COVID-19 outbreak. Prime rents increased to 22 EUR/sq m/month in Q3 (compared to 21 EUR in Q2). They should continue to rise gradually to reach a historically high 26 EUR/sq m/month by the end of 2025.
0 20 15 20 16 20 17 20 18 20 19 20 20 H1 21 Q 3 21
50
Mai n Stre et
20 22 20 23 20 24 20 25
In the High Streets, after following corrections since 2017, prime rents increased in Q3 to reach 140 EUR/sq m/month (compared to 135 EUR/sq m/month last quarter). According to our forecasts, new rental growth are forecasted as from 2022 up to 2025 to reach around 145 EUR/sq m/month.
Sho ppi ng cen tre
Out o f Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q3 2021 Only one retail investment transactions in Q3 2021. The sale of the Livingstone Delhaize in Cessange for 8,7 MEUR is the only transaction recorded on the retail investment market in Q3 2021. Year-to-date, close to 80 MEUR have however been recorded thanks to the sale of the Cora Foetz for 70 MEUR in the beginning of the year. In this unprecedented context and changing retail landscape, investors may be demonstrating greater cautiousness in terms of investments in retail. Since 2018, no investment transactions have been observed in the High Street segment in Luxembourg, with the exception of the Grand-Rue 79 in Q2 2021 (confidential volumes). The lack of opportunities impacted the activity as landlords tend to hold their position.
Retail investment volumes by segment (MEUR) 30 0 25 0 20 0 15 0 10 0 50 0 20 15
20 16 Mai n Stre et
Investors are showing a growing interest in retail parks – especially when they include a food store. This is confirmed by the Livingstone Delhaize transaction observed in Q3.
20 17
20 18
20 19
Sho ppi ng Ce ntre
20 20
H1 2 1
Out o f Town
Prime retail yield evolution 6,5%
Slight corrections of the prime yields in the Shopping Centre segment this quarter.
6,0% 5,5%
Prime yields in the Out of Town segment have not been impacted by the COVID-19 outbreak and are perfectly stable since 2017 at 6%. They should remain at this level in the coming years, though the sale of the Livingstone Delhaize suggest an important compression when a food retailer is present. For example, this transaction shows a yield at 4%.
4,5% 4,0% 3,5% 3,0% 2,5% 2,0%
Mai n Stre et
20 22 20 23 20 24 20 25
Conversely, the lack of activity in the shopping centres and the growing concerns of investors for this asset class contributed to a rise of prime yield to 6% in Q3 (compared to 5.75% in Q2). Prime yields for shopping centres are also expected to remain stable till the end of 2025.
5,0%
20 15 20 16 20 17 20 18 20 19 20 20 H1 21 Q 3 21
This quarter, we revised our prime yields figures and prime yields forecasts. Prime yield in the High Streets remains stable at 3.75% after consecutive increase in the previous quarters and they are now expected to remain stable till 2025 (last quarter, we still forecasted new rise up to 3.90%) as the Luxembourg retail market is perfomring better than expected.
Sho ppi ng Ce ntre
Out o f Town
M A R K E T B E AT
Luxembourg Retail Market Retail Q3 2021 MARKET STATISTICS TAKE-UP YTD (SQM)
SEGMENT
INVESTMENT VOLUMES (MEUR)
PRIME RENTS (EUR/SQ M/M.)
PRIME YIELD (%)
Main Street
7,145
140
-
3.75%
Shopping Centre
3,874
90
70
6.00%
12,061
22
8,7
6.00%
23,080
-
78,7
-
Out of Town Luxembourg (Overall)
SOME LEASE TRANSACTIONS Q3 2021 CITY
PROPERTY
SEGMENT
TENANT
SIZE (SQ.M)
Esch-sur-Alzette
Avenue de la Gare 27
Main Street
Delhaize
567
Luxembourg
Grand-Rue 74
Main Street
Les Hommes d’Amsterdam
234
Bertrange
City Concorde
Shopping Centre
Mango
224
Mersch
Listo Shopping Centre
Shopping Centre
Zero Latency
419
Out of Town
Trafic
Out of Town
Nomad Bike & Coffee
Mersch Leudelange
Triologie
1,856 182
*Renewals not included in leasing statistics
INVESTMENT TRANSACTIONS Q3 2021 PROPERTY Livingstone Delhaize
SEGMENT Out of Town
SELLER / BUYER Immobel Luxembourg / Private
YIELD 4.00%
PRICE (MEUR)
CÉDRIC VAN MEERBEECK Head of Research & Marketing | Belgium & Luxembourg +32 477 98 11 83 cedric.vanmeerbeeck@cushwake.com MARINE FETIQUE Retail Agency Luxembourg +352 661 799 407 marine.fetique@cushwake.com
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